In a decision handed down on March 10, the FCC charged that the local telcos disrupted the US-Philippine networks of AT&T and WorldCom in retaliation for their refusal to agree to the local demand for rate increase.
The local carriers, however, said they will stand by the increase in charges levied on foreign carriers for calls from the US as well as the termination of services to America’s largest carriers AT&T and WorldCom, both actions having been approved by the National Telecommunications Commission (NTC).
The Philippine Long Distance Telephone Co. (PLDT), the country’s dominant carrier, said the FCC decision was "detrimental to the Philippines, its people and its economy."
PLDT warned that this might disrupt telephone service between the two countries, saying "no company in its right mind can continue to provide service knowing it will not be paid."
It charged that US carriers like AT&T and WorldCom should be held responsible for any service disruption because they allegedly lobbied to issue the order.
PLDT management also said that it shall abide by the Philippine NTC directive to "seek other routes or options to terminate traffic to the Philippines" and remain open, as it has always been, to discussions with AT&T and MCI Worldcom for alternative routes and options that will allow traffic to flow.
Digital Telecommunications Philippines Inc. (Digitel), another local carrier, said it was surprised by the FCC ruling, which it added would "bring more hardships" to local companies which stand to lose millions of dollars.
For its part, Globe Telecom said they might appeal the FCC decision to the commission en banc.
In case of an adverse decision, local telcos may appeal the FCC ruling before US courts, according to Globe senior vice-president Rodolfo Salalima.
Salalima added that they are also looking at the possibility of questioning FCC’ s jurisdiction over Philippine telcos.
Lopez-owned Bayan Telecommunications (Bayantel), meanwhile, said it remains firm in its position regarding the termination rate increase.
BayanTel chief consultant Tunde Fafunwa said the US FCC ruling subjectively adopted the position of AT&T and did not address the detailed concerns of ABS-CBN Telecom USA and other non-dominant US and Philippine telecommunication carriers, as well as the position filed by the NTC.
"BayanTel remains firm in its position regarding the termination rate increase and we remain hopeful that the US FCC recognizes the validity of our position in the interest of the Filipino consuming public and the continued viability of our company," Fafunwa said.
They also said the US carrier can use a third party network, say in another country, for land call traffic in the Philippines in the meantime while services in the US-Philippine route have returned to normal.
Local carriers said that the FCC ruling will only worsen the situation since there is nothing in the law that requires them to render services to a company that will not pay.
However, they are hopeful that Filipinos all over the world will be able to continue calling the Philippines without disruption since there are always alternative routes to sending traffic here.
"However, if AT&T’s traffic to the Philippines suffers as a result of its own act of refusing to pay Philippine carriers, then AT&T has only itself to blame," Globe head of wireline and carrier business Gil Genio said.
‘Whipsawing’ often manifests itself in the form of a foreign carrier "picking off" or isolating a US carrier and placing that carrier under substantial pressure to agree to its demands. Once one US carrier has conceded, other US carriers are pressured to accept the same agreement or risk sanctions or retaliation.
The FCC has found that ‘whipsawing’ is contrary to the public interest, as it forces US carriers to recover unnecessarily high payments imposed by foreign carriers from US ratepayers through higher calling prices.
AT&T and WorldCom filed a petition with the FCC last Feb. 7 opposing the increase in "termination rates" by Philippine carriers from 8.5 cents per minute to 12 cents for calls to landlines and from 12 cents to 16 cents for calls to mobile phones in the Philippines effective last Feb. 1.
The FCC ordered all US carriers that provide facilities-based international switched voice services on the US-Philippines route (such as AT&T and WorldCom) to suspend immediately all payments for termination services to PLDT, PLDT subsidiaries Smart Communications and Subic Telecom, Globe Telecom, Bayan Telecommunications (BayanTel), and Digital Telecommunications Philippines, Inc. (Digitel).
The suspension shall remain in effect until AT&T and WorldCom’ s circuits and services are fully restored.
The US-Philippines route, which generated approximately 1.7 billion minutes of traffic in 2001, is the fourth largest US-international route in terms of US-outbound minutes.
The US carriers with the largest shares of US-billed traffic on the US-Philippines route are AT&T, WorldCom, Sprint, and PLDT’s US subsidiary.
AT&T in 2001 accounted for about 31.2 percent; WorldCom 23.2 percent; and Sprint 22.6 percent of calls to the Philippines.
According to AT&T and WorldCom, the Philippine carriers provided no cost justification for the demanded rate increases and that beginning Feb. 1, 2003, both PLDT and Globe began blocking their circuits with AT&T.
Shortly thereafter, BayanTel, Digitel, Smart, and Subic Telecom also began blocking a substantial number of their circuits with AT&T.